Resources

Part 36 Offer in the Technology and Construction Court

February 2017 - Issue 90

A Part 36 offer is an offer to settle a dispute at any stage in legal proceedings. It is one of the most important tactical steps that a party can take in legal proceedings as the treatment of a Part 36 offer may have significant cost implications. Any party can make an offer. If settlement is not achieved, it will protect the offeror, to some extent, in relation to costs. The form and content of a Part 36 offer must be followed when making an offer in order to constitute a valid Part 36 offer.

Facts

The case of Wes Futures v Allen Wilson Construction [2016] EWHC 2863 (TCC) concerned a dispute over £86,496.21 of unpaid invoices. An adjudication had originally been scheduled by Wes Futures (‘Futures’) although this never took place as the adjudicator resigned.

Futures’ lawyers threated Allen Wilson Construction (’Allen’) with court proceedings and on the same day, 11 February 2016, they also made a without prejudice Part 36 offer to Allen to settle for £65,000 plus VAT. The offer provided that if the offer was accepted more than 21 days from the date of the offer, then Allen would be liable for Futures legal costs incurred in the case.

The claim went to adjudication and in September 2016 the adjudicator upheld Futures’ claim in full. Allen did not pay the award and so Futures brought enforcement proceedings in the TCC. On 4 November 2016, Allen accepted Futures’ Part 36 offer dated 11 February 2016.

The following issues arose:

whether the offer constituted a Part 36 offer so that the Part 36 provisions as to costs would apply; and

whether the provision that Allen was liable to pay Futures legal costs incurred in the case included two previous adjudications in 2015 and 2016, as well as the costs of the court proceedings.

Decision

It was held that:

The offer did constitute a valid Part 36 offer as the acceptance repeated the reference to the Part 36 offer and the cost provisions were consistent with costs provisions stated in Part 36 of the Civil Procedure Rules.

The offer related to imminent court proceedings and this is what Allen accepted. The offer was made in relation to the costs of court proceedings and did not, therefore, include the costs of the previous adjudications.

In the ordinary case, parties are not entitled to the costs of adjudication or the costs of pre-action mediation in relation to the costs of legal proceedings for Part 36 offers.

This is a reminder that the cost implications of alternative dispute resolution procedures should be considered separately to Part 36 offers.